Centrelink’s creation reflected the mood of the mid-1990s. The past 25 years have been remarkable for the level of public sector change in Australia, which has been a foremost exponent of the new public management in the reform era that emerged in the 1980s (Halligan 1997). The wave of reform was characterised by its magnitude, experimentation with new organisational forms and attention to system design. Reform was rapid, systemic and comprehensive as a range of specific measures was applied across the public sector (Halligan and Power 1992).

These reforms arose from societal pressures on governments to improve public services. There were demands for more cost-effective and high-quality services, increased consumer awareness and higher expectations of services tailored to individual needs and distrust of command structures and hierarchies with overheads that were administratively obstructive compared with devolved arrangements in which decisions could be made at the point of delivery. Further factors included advances in information technology (IT), which automated or facilitated many clerical tasks, and a changing international environment. In the search for solutions, governments turned to the private sector in the belief that a more businesslike public sector would rectify past difficulties and improve performance (Wills 1999).

The reforms can be seen through the changing agendas covering political control, management, markets and reorganisation. The Hawke–Keating Labor Government (1983–96) favoured the public sector while pushing it heavily towards the private sector. The conservative Coalition government that followed favoured the private sector but recognised the need to maintain a strong core public service. Later directions that emerged in the 1990s were fundamentally different from those in the initial decade of reform, in particular the shift from management reform to market-based change. The election of the Coalition Government in 1996 accelerated the emerging trends, initially focusing on cutting the budget deficit and the level of public sector staffing, and then on other fundamental changes.

The four terms of the Howard Government can be viewed as coinciding with different reform phases. The first term supported a neo-liberal agenda that emphasised cost cutting, markets and the private sector. The second and third terms provided opportunities for the reforms to be tested through implementation and then refined. In the process, the hard-edged focus of the 1990s emerged as less appropriate in the 2000s. In the fourth term, new agendas emerged such as reviewing corporate governance, a whole-of-government agenda and a strengthening of central processes (Halligan and Adams 2004; Halligan 2005, 2006a, 2008; Hamburger 2007).

What was significant was that the reform environment surrounding the formative years of Centrelink was characterised by devolution, privatisation, contracting, consumer choice and an intensification of cutbacks and the promotion of the private sector over the public sector. The second half of the period under consideration was dominated by different government agendas that favoured reintegration and reviews of non-departmental organisations.

The refocusing of policy agendas for social security has also been important. Since the creation of Centrelink in 1997, there has been a number of changes to income support and welfare programs. For the first few years, these were limited in scope, but in 1999 another rethink of the welfare system was announced (details in Appendix 2), which had a significant impact.

The first strand of this round of welfare reform focused on working-aged people who were unemployed and receiving support. ‘Work for the Dole’ programs began in 1997 and involved local communities in activities of value to them that provided work experience for the unemployed. ‘Youth Allowance’ was introduced in 1998 and represented the rationalisation of income-support arrangements for the young unemployed and students.

The Job Network introduced from 1998—a result of the dissolution of the Commonwealth Employment Service (CES) as part of the Centrelink solution—completely changed employment placement assistance arrangements for the unemployed. After clients registered with Centrelink for benefits, they were referred to the Job Network—mostly voluntary agencies outside the Public Service that were contracted to assist the unemployed to find work or undertake training. Selected job seekers aged between 18 and 34 were required to meet mutual-obligation activity requirements.

A second major strand of reform involved reviewing welfare policy. The government launched a welfare review based on a set of principles that included establishing better incentives for people receiving payments, creating greater opportunities to increase self-reliance and capacity building and expecting people on income support to help themselves and society through participation in a mutual-obligation framework. The government response, ‘Australians Working Together’ (AWT), was intended to strike a new balance between incentives, obligations and assistance in welfare. AWT implementation occurred in stages through budgetary decisions and legislation that allowed a package of incentives, assistance and extra requirements to be introduced, and which impacted on Centrelink’s service delivery.

Three major implications for Centrelink emerged from these agendas: the commitment to welfare reform and major policy change, the overall momentum of environmental change and the regular policy adjustments to service delivery.

The importance of the external environment is well understood but the form of interaction with external actors varies from conceptions that view the environment as the determinant of organisational behaviour (for example, conformity with the market produces the best results) to those that recognise that the environment can be influenced, managed and can be ‘pliable and responsive’ (Light 1998:14). The capacity to influence the environment, or rather significant actors in the environment, recognises a more dynamic relationship that will vary across issues and actors.

All organisational imperatives for Centrelink can be regarded as external, but the two primary relationships are those with the political executive and its client departments. The interaction between Centrelink and its external environment is where institutional tensions are potentially strongest. Centrelink has the attributes of a department of state but is positioned within contractual relationships with a range of departments for which it provides fixed and variable services.

The need to ‘position for opportunities’ has been identified by studies of the US Social Security Administration and Air Force (Derthick 1979; Barzelay and Campbell 2003). Public organisations operating in potentially constraining environments can, through positioning themselves, implement their objectives. Centrelink originally emerged from a combination of personalities, agendas and opportunities after the election of a new government. The concept was shaped by a compromise reflecting political expectations and the interests of existing departments. This compromise had long-term consequences for operations and relationships between client departments and Centrelink (Halligan 2004).

The continuing constraints took the form of the general reform agenda under a neo-liberal government, specific agendas such as welfare reform and the various imperatives discussed earlier. These constraints imposed different types of discipline on Centrelink, in particular where potential conflicts arose among the different stakeholders. The basis for subsequent debates about the roles of purchasing departments and provider agencies was laid by the combination of models that could be discerned in Centrelink’s organisational imperatives (such as different interpretations about the relative importance of purchaser–provider principles, partnerships and political direction).

These differences were also established by the bureaucratic politics attendant on the entrance of a new type of agency. Unlike the United Kingdom and New Zealand, where the separation of policy and implementation was applied systemically, in Australia, Centrelink was an exception as a new delivery agency.^[5] Despite being the largest organisation in the APS and undertaking work for a number of departments, Centrelink was excluded from the departmental club.

Obstacles, however, need not preclude the creation of opportunities, if an agency can lever off other attributes. Centrelink was an innovation of a government that conformed to the neo-liberal agenda. The ambiguity and conflicting imperatives also provided scope for initiative. The mandate to seek new business was a spur for entrepreneurial initiatives and the language of ‘positioning’ featured in Centrelink documents. Through advocacy and smart practices, opportunities could be turned to advantage as long as organisational longevity was ensured. The original mandate as a delivery agency designed to provide services to purchasing departments and its unconventional character provided bases for Centrelink to position itself within the Public Service. The positions advocated, in addition to the one-stop shop, were the ‘provider of choice’, premier broker of information and solutions and ‘inclusive service delivery’ (Vardon 2000c; Zanetti 1998).

The advocacy of an agency position was clear in various operational contexts involving different types of inter-agency interaction. One was about competing for policy and contributions to the process; another examined using entrepreneurial and advocacy skills to consolidate and expand the agency’s role while evolving a distinctive service delivery focus. A more intriguing development was the way the agency addressed inter-agency conflict and moved towards a more integrated alliance with its main client. This ultimately meant building inter-agency capacity to bridge organisational divisions.

Service delivery is the core rationale of Centrelink as a specialised agency. The original policy problem for the Federal Government was that two departments had developed an overlapping network of offices that provided similar types of service—primarily social welfare payments and unemployment benefits. This was seen as wasteful duplication and confusing to recipients, many of whom were customers of both departments. The solution was intended to reduce government costs, to remove confusion for service recipients and to increase efficiency. The new agency was to provide services for both original departments, which could establish purchasing agreements for the services delivered.

Redesigning and modernising a large organisation for service delivery is a complex task. It was to be a customer-focused agency operating in a contested environment. Insights into the response of an agency specialising in service delivery can be found in the concept and operation of its core responsibility—namely, how it engages the customer and the design of its service delivery structures. External and internal dimensions—specifically, the policy context of service delivery already discussed and the management support for this function—need to be examined.

How did Centrelink respond to these challenges? In short, it developed a clear and systematic approach to service delivery models. In time, this involved moving from the original diverse and individual government programs towards a more holistic, integrated customer service. As the organisation developed, the delivery model moved through several stages (Vardon 2000b).

Important issues faced by Centrelink included how to achieve organisational goals (which could be conflicting), such as customer responsiveness, improved service quality and the demands for cost efficiency. The achievement of goals requires the building of management capacity. To transform an organisation from a traditional departmental and bureaucratic form, however, and to sustain performance, requires careful consideration of an appropriate process for change.